China’s exports grow for first time in 6 months, relief for factories

BEIJING, Dec 7 (Reuters) – China’s exports grew for the first time in six months in November as factories in the world’s second-largest economy wooed buyers with discounted prices to offset a lingering slump in demand.

Mixed manufacturing data for November kept alive calls for more policy support to boost growth, but also raised questions about whether mainly negative sentiment-based surveys masked improvements in conditions.

Customs data on Thursday showed imports grew 0.5% from a year earlier in November, compared with a 6.4% drop in October and a 1.1% drop expected in a Reuters poll. Imports fell 0.6%, beating forecasts for a 3.3% increase and swinging from last month’s 3.0% rise.

“The improvement in exports is broadly in line with market expectations…Continuous growth in China’s exports has strengthened over the past few months,” said Shiwei Zhang, chief economist at Pinpoint Asset Management. “Export data from other Asian countries have also seen green shoots in recent months.”

The Baltic Dry Index, a bellwether measure of global trade, rose to a three-year high in November, supported by improved demand for industrial goods, particularly from China.

South Korean exports, another measure of the health of global trade, rose for a second straight month in November, buoyed by chip exports, which snapped 15 months of declines.

China’s trade with its key counterparts also painted a rosy picture, with exports to the US, Japan, South Korea and Taiwan all increasing in October.

Discounted exports

However, in the short term, the pressure on Chinese manufacturers shows little sign of easing completely.

China’s official Purchasing Managers’ Index (PMI) last week showed new export orders contracted for a ninth straight month, while a private sector survey highlighted factory owners’ struggles to attract foreign buyers for a fifth straight month.

“While the volume of export volumes reached new highs, (they) were supported by exporters cutting prices,” noted Jichun Huang, China economist at Capital Economics.

“Exporters cannot continue to cut prices for long,” Huang warned.

Official PMI showed factory gate prices contracted for a second straight month in November, while input costs expanded for a fifth straight month.

However, some analysts point to faster-than-expected growth in the third quarter and a stream of mostly upbeat data since October, arguing that the latest hard data paint a less bleak picture of the Asian giant’s economic health than sentiment-based surveys. . Hard data suggest that Beijing’s exit support measures since June have had some effect.

“The data shows that foreign demand is stronger than we thought and domestic demand is weaker than we thought,” said Dan Wang, chief economist of Hong Kong Bank China. “The biggest export items are still electric machines and cars, so demand in Europe and Russia will boost outbound exports.”

Random recovery

Analysts say it is too early to tell whether recent policy support will be enough to boost domestic demand, and how much of a sustained improvement in overseas demand, with property, unemployment and weak family and business confidence threatening a sustained recovery at home.

The International Monetary Fund in November upgraded China’s growth forecasts for 2023 and 2024 by 0.4% percentage points each, but that came from a low base. And Moody’s issued a downgrade warning on China’s A1 credit rating on Tuesday.

Chinese markets appeared to echo that warning, with the yuan easing against the dollar after the data, while the country’s blue chip CSI300 stock index fell 0.44% and Hong Kong’s Hong Kong Seng lost 1.46%.

China’s crude oil imports fell 9.2% year-on-year in November, the first annual decline since April as higher inventory levels and poor production activity dampened demand for products such as diesel. But iron ore imports rose slightly last month.

“Although export demand has improved, it remains unclear whether exports will contribute as a pillar of growth next year,” cautioned Pinpoint Asset Management’s Zhang.

“European and US economies are cooling. China should still rely on domestic demand as the main driver of growth in 2024.”

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